Estimating the Effects of AGOA on African Exports Using a Dynamic Panel Analysis
29 Pages Posted: 31 Oct 2007
Date Written: July 2005
This study uses a dynamic panel gravity trade equation with endogenous explanatory variables to examine the effects of the African Growth and Opportunity Act (AGOA) on exports from Sub-Sahara Africa (SSA) to the United States. The AGOA effects are identified using the Arellano-Bond Difference GMM, and the Arellano-Bover and Blundell-Bond System GMM estimators applied to a panel of 46 SSA countries over the period 1996-2004. The results strongly support the existence of a positive impact of AGOA on African exports, particularly if the elasticity of substitution of the differentiated African exports is less than unity. Although less likely, higher elasticities could lead to a neutral, or even a negative, effect of AGOA on African exports to the US. Among other things, these results suggest that the more distinctive are African exports, the higher are the benefits accruing to these exports under the AGOA preferential trade initiative.
Keywords: AGOA, Africa exports, Dynamic panel, Gravity Trade model
JEL Classification: C22, F13
Suggested Citation: Suggested Citation